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RIU GOOD OIL CONFERENCE 2015 3 September 2015 F
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§ This presentation does not constitute investment advice. Neither this presentation not the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in Elk Petroleum Ltd – ABN (the “Company”) - in any jurisdiction.
§ Shareholders should not rely on this presentation. This presentation does not take into account any person’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments.
§ The information set out in this presentation does not purport to be all inclusive or to contain all the information which its recipients may require in order to make an informed assessment of the Company. You should conduct your own investigations and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation.
§ To the fullest extent permitted by law, the Company does not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates, forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of the negligence or otherwise is accepted.
§ This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of the Company. These risks, uncertainties and assumptions include commodity prices, currency fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory developments, political risks, project delay or advancement, approvals and cost estimates.
§ Actual values, results or events may be materially different to those expressed or implied in this presentation. Any forward looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, the Company does not undertake any obligation to update or revise any information or any of the forward looking statements in this presentation or an changes in events, conditions or circumstances on which any such forward looking statement is based.
§ The reserves and resources assessment follows the guidelines set forth by the Society of Petroleum Engineers – Petroleum Resource Management System (SPE-PRMS).
§ The Reserves and Contingent Resources in this announcement relating to the Grieve CO2 EOR project, operated by Denbury Resources, is based on an independent review and audit conducted by Pressler Petroleum Consultants, Inc. and fairly represents the information and supporting documentation reviewed. The review and audit was carried out in accordance with the SPE Reserves Auditing Standards and the SPE-PRMS guidelines under the supervision of Mr. Grant Olsen, a Director of Pressler Petroleum Consultants, Inc., an independent petroleum advisory firm. Mr. Olsen is a Registered Professional Engineer in the State of Texas and his qualifications include a Bachelor of Science and Master of Science (both in Petroleum Engineering) from Texas A&M University. He has more than 10 years of relevant experience. Mr. Olsen is a member of the Society of Petroleum Engineers (SPE) and an Associate Member of the Society of Petroleum Evaluation Engineers. Mr. Olsen meets the requirements of Qualified Petroleum Reserve and Resource Evaluator as defined in Chapter 19 of the ASX Listing Rules and consents to the inclusion of this information in this report.
§ The information in this presentation that relates to Reserve and Contingent Resources estimates for the Grieve CO2 EOR project and the Contingent Resource estimates for the Singleton CO2 EOR project have been compiled or in the case of the Singleton CO2 EOR project prepared by Mr. Brian Dolan, COO and VP-Engineering of Elk Petroleum USA who is a qualified person as defined under the ASX Listing Rule 5.11 and has consented to the use of the reserves figures in the form and context in which they appear in this presentation. Mr. Dolan is a full-time employee of the company. Mr. Dolan earned a degree in Mechanical Engineering from the University of Colorado at Boulder and has more than 23 years of relevant experience. Mr. Dolan has sufficient experience that is relevant to the company’s Reserves and Resources to qualify as a Reserves and Resources Evaluator as defined in the ASX Listing Rules. Mr. Dolan consents to the inclusion in this presentation of the matters based on the information in the form and context in which it appears
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Disclaimer & Important Notice F
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Who are we?
§ Only ASX-listed, Enhanced Oil Recovery (EOR) company with 10-years focused EOR experience
§ Strong leadership team with proven track record of value creation
§ Focused on oil field redevelopment in North American proven EOR production fairways
§ Oil price pressures presents a unique opportunity for low-cost asset accumulation
§ Substantial growth potential within core EOR production fairways
§ Potential for Elk to acquire up to 100% ownership and operatorship of Grieve Project
§ Longer-term growth strategy of applying EOR in largely untapped areas of Australia, Indonesia and Malaysia
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Miro Advisors appointed to assist with targeting potential acquisitions and associated financing
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Corporate Summary
Capital Structure ASX code ELK
Ordinary Shares 201.1m
52-week Low-High (A$ cps) 0.02-0.12
Market cap @ 12cps A$24m
Enterprise Value (USD 1: AUD 0.73) A$43m
Cash (30 June 2015) A$1.6m
Reserves + Resources (2P+2C) ~6.5 mmbls
Elk one-year share price chart 12-months ending 28 August 2015
Major shareholders Robert Healy 20.85%
HSBC (Including Republic Investment Management)
10.89%
Begley Superannuation 8.98%
Board & Management 3.4% - Pre Placement 7.0% - Post Placement
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0.02
0.04
0.06
0.08
0.1
0.12
Grieve EOR Project - CO2 injector facility
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Enhanced & Improved Oil Recovery EOR & IOR
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What is EOR / IOR ?
§ Specialised oil recovery methods
§ Secondary – Improved Oil Recovery
§ Tertiary – Enhanced Oil Recovery
§ Proven technology since 1960s
§ Extracts up to 40% of original oil in place (OOIP)
§ Substantially increases oil field life
§ Attractive economics in low oil price
§ Used extensively in North America and the Middle East
§ Largely under-utilised in Australasia
20-‐25%
10-‐20%
10-‐20%
35-‐60%
Overall Oil Recovery
Primary Recovery Secondary Recovery -‐ IOR
Tertiary Recovery -‐ EOR Remaining Oil
Our Focus
Source: Advances in Enhanced Oil Recovery Processes – Romero-Zeron – University of New Brunswick (2012)
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Primary & Secondary Oil Recovery Processes
Source: Advances in Enhanced Oil Recovery Processes – Romero-Zeron – University of New Brunswick (2012)
CONVENTIONAL OIL RECOVERY PROCESS
PRIMARY OIL RECOVERY Natural Reservoir Drive Mechanisms
SECONDARY OIL RECOVERY
Rock/Liquid Expansion
Depletion Drive
Gas Cap Drive
Water Drive
Gravity Drainage
Combination Drive
Waterflooding
Immiscible Gas Injection
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Primary & Secondary Oil Recovery Processes
Source: Advances in Enhanced Oil Recovery Processes – Romero-Zeron – University of New Brunswick (2012)
CONVENTIONAL OIL RECOVERY PROCESS
PRIMARY OIL RECOVERY Natural Reservoir Drive Mechanisms
SECONDARY OIL RECOVERY
Rock/Liquid Expansion
Depletion Drive
Gas Cap Drive
Water Drive
Gravity Drainage
Combination Drive
Waterflooding
Immiscible Gas Injection
Most efficient natural drive
Most widely applied secondary
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Tertiary Oil Recovery Process – EOR
Source: Advances in Enhanced Oil Recovery Processes – Romero-Zeron – University of New Brunswick (2012)
EOR Processes
Miscible Gas
Injection
Thermal
Chemical
Other
Mobility Control
CO2 Flood
Flue Gas
LPG
Enriched Gas
High Pressure Gas
Nitrogen
Steam Flood
In-situ Combustion
Surfactant Flooding
Alkaline or Caustic Flood
Rock Effective Permability Reduction
Polymer Augmented Waterflood
Microbial EOR
Mechanical
Electrical
Chemical Leaching
In-situ Conversion
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A broad array of tools!
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Tertiary Oil Recovery Process – EOR
Source: Advances in Enhanced Oil Recovery Processes – Romero-Zeron – University of New Brunswick (2012)
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EOR Processes
Miscible Gas
Injection
Thermal
Chemical
Other
Mobility Control
CO2 Flood
Flue Gas
LPG
Enriched Gas
High Pressure Gas
Nitrogen
Steam Flood
In-situ Combustion
Surfactant Flooding
Alkaline or Caustic Flood
Rock Effective Permability Reduction
Polymer Augmented Waterflood
Microbial EOR
Mechanical
Electrical
Chemical Leaching
In-situ Conversion
ELK experience
CO2 EOR - Most efficient approach
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How does CO2 EOR work?
§ Known as ‘Green Oil’ as it can deliver carbon negative oil
§ Most commonly-used form of EOR
§ Most efficient EOR – recovers most oil
§ Accounts for ~60% of US EOR production
§ CO2 often sourced from natural deposits
§ CO2 can be supplied from man-made sources
§ Only profitable form of carbon capture & storage (CCS) without subsidy
Secure CO2 supply
Transport via pipeline
or truck Inject into
oil field
Putting a cost on carbon emissions will only further enhance CO2 EOR potential
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Current Projects
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Overview
ELK PROJECTS
Grieve Singleton
Location of current CO2 EOR projects and pipeline infrastructure Source: NETL 2010
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Where we are….
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And the CO2 Resource & Infrastructure….
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Flagship Grieve Oil Field CO2 EOR Development
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§ Elk currently holds 35% interest
§ Opportunity to acquire Operator’s 65% interest and resume full Project ownership
§ Miro Advisors appointed to assist with acquisition & financing
§ Estimated Gross Project Cost = ~US$125m § Investment to date = ~US$70m § Elk remaining CAPEX to First Oil = ~US$12-13m
§ Project approximately 70%+ complete
§ Most major production facilities complete with only CO2 Recycling Facility to be completed
§ First oil targeted for Q1 CY2017
§ CO2 supply contract with ~60% injected necessary to reach first oil production
§ Attractive economics and material cash flow
Grieve CO2 EOR Project - Overview
Source: Elk ASX Release 29 January 2015 – Grieve Reserve Update
Reserve Summary at 31 December 2014
Scenario Net Oil to Elk (Mbbls)
Capital Expenditures (US$MM)
2P (Probable Reserves) 3,455 25.8
3P (Probable + Possible Reserves) 4,660 22.4
3C (Contingent Resources) 4,685 21.1
Source: Elk ASX Release 29 January 2015 – Grieve Reserve Update
100
1,000
10,000
Gross Oil Ra
te, B
bls/D
Time, Years
Grieve -‐ 3C
Grieve -‐ 3P
Grieve -‐ 2P
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Grieve CO2 EOR Project – A Field-level View
* Based on Elk’s own estimates
CO2 INJECTORS / WATER INJECTORS
FEET
2,0470
PRODUCERS
10 Existing wells
8 New Wells
9 Existing Wells
2 New Wells
Central Facilities Location - Office - Power - Oil storage - Processing & compression - Distribution and gathering manifold centre
Elk 100% owned crude oil export pipeline
to Casper
CO2 Metering Station
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Grieve CO2 EOR Project – Activities
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§ Work Completed § New injection and production wells
§ In-field CO2/water injection& Oil production flow lines
§ Power supply from local grid installed
§ Site works & production manifold
§ 3-mile CO2 supply line
§ Crude oil export pipeline upgrade
§ Reservoir re-pressurising § 10+ million barrels of water injected
§ 17+ Bcf of CO2 injected
§ Est 30 BCF CO2 required to achieve first oil
§ Currently injecting CO2 at 40 MMCFD
§ Reservoir pressure rising in line or ahead forecast
§ Remaining Steps to First Oil § Construction of oil processing & CO2
recompression facilities
§ Continue injection of water and CO2 to re-pressurise the reservoir F
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Singleton Oil Field CO2 EOR Development
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Singleton Oil Field – Overview
§ 100% Elk-owned & operated project
§ Located in oil-prolific Denver-Julesburg Basin
§ Targeting same excellent quality sands as in Grieve Project
§ Setting ideal for CO2-oil miscibility
§ Modest acquisition cost – less than $500k
§ Utilise existing wells for field redevelopment
§ Expect rapid response to injected CO2
§ Field in close proximity to CO2 supply source
§ Potential development on near-by satellite fields to improve overall economics
Singleton Base Case Reserves – Development Case MI3
(2014)
Resources – 2C (mmbbls) 3.0
Gross Project Investment (US$ million) 48
Capex + Opex (US$/bbl) 42
F&D (US$/bbl) 15
Undiscounted PV (US$ million) 47
Undiscounted PIR 1.0
Discounted PV10% (US$ million) 10
Discounted PIR 0.2
IRR% 15 See Elk Corporate Presentation of 10 August 2015 page 42 for reference to oil price forecast used in economic analysis
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Singleton AOI CO2 EOR Development Hub
§ Area of Interest (AOI) has 10 oil fields
§ AOI Fields produced a combined 51 mmbbls
§ AOI Goal to develop 5 largest fields on a staged CO2 project
§ AOI Indicative CO2 EOR Potential 25 mmbbls
§ Potential Bridgeport CO2-source sufficient to supply AOI Hub
§ Development of CO2 EOR Hub markedly improves overall economics
Singleton
Bridgeport
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Corn Ethanol Producers – A Potential New Large-Scale CO2 Supply
POWDER RIVERBASIN
DENVER-JULESBURGBASINCOLORADO
WYOMING
NEBRASKA
SOUTH DAKOTA
KANSAS
MISSOURI
IOWA
MINNESOTA
WISCONSIN
ILLINOIS
MI
IOWA
MOVE CO2 WEST TO EOR OPPORTUNITIES IN PRB & DJB
Existing & planned CO2distribution pipeline
Corn-Ethanol Plants
Oil Fields
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Denver-Julesburg Basin – Significant Growth Area for Elk
§ DJ Basin has over 1000 oil fields (shown in yellow) in Colorado and Nebraska
§ Intensive drilling activity began in 1950
§ More than 52,000 wells drilled
§ Similar to Grieve Project:
§ Primary producing formation is the Lower Cretaceous Muddy (“J”) Sandstone
§ Conventional “J” sandstone reservoirs are stratigraphic traps
§ Water flooding of the “J” reservoirs began in the early 1960’s
§ Most fields are nearing end of secondary recovery efforts and approaching abandonment without EOR
DJ Basin is a mature oil basin that has not had any tertiary oil recovery projects
HA
RTV
ILLE
U
PLIF
T
105°00' 104°30' 104°00' 103°30' 103°00' 102°30'
DAWES
42°15'
Torrington SIOUX BOX BUTTE SHERIDAN
42°00' Wheatland SCOTTS BLUFF MORRILL GARDEN
41°45' PLATTE GOSHEN
BANNER
41°30' LARAMIE Horse Creek
Silo Chivington KIMBALL
41°15'
ALB
AN
Y Cheyenne
Borie WYOMING NEBRASKA CHEYENNE DEUEL
41°00' LARIMER WELD COLORADO LOGAN
Wellington SEDGWICK
40°45' PHILLIPSFort Collins Pierce Black Hollow Sterling
New Windsor 40°30' Windsor
Loveland Greeley MORGAN
Wattenberg 40°15' Brush
BOULDER Longmont Fort Morgan
Yuma 40°00' Boulder
Spindle Denver
Beecher 39°45' ADAMS
Island
ARAPAHOE WASHINGTON YUMA
39°30'
JEFF
ER
SO
N ELBERT LINCOLN KIT CARSON
Parker
Bethune0 10 20 30 MILES Castle Rock
39°15' 0 10 20 30 40 KILOMETERS DOUGLAS
2 Assessment of Undiscovered Oil and Gas in the Denver Basin Province
Figure 1. The northern two-thirds of the Denver Basin of Colorado, Nebraska, and Wyoming. Shown are oil (yellow-green), oil and gas (blue), and gas (red) wells across the basin. Major fields within the Front Range area are labeled (white text). The white line shows the northern and eastern boundaries of the study area. Western boundary is the approximate eastern limit of Precambrian rock exposures in the Rocky Mountain foothills. Vertical scales of the underlying digital elevation model (DEM) are 30 and 90 meters.
Bridgeport CO2 Supply
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Market Opportunity
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Global EOR Potential
BCC Research, August 2013
Global EOR market* • Projected to grow at 8.8%
CAGR • Estimated to be worth
$34.4bn by 2019
~40 bn barrels
~16 bn barrels
~40 bn barrels
~475 bn barrels
~11 bn barrels
~50 bn barrels
~58 bn barrels
~120 bn barrels
Source: Society of Petroleum Engineers
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Market Opportunity - US
§ First commercial CO2 EOR production commenced in 1972 § ~100bn to 160bn barrels of stranded oil forecast for recovery by EOR technology* § 1.5bn barrels produced through CO2 EOR over past 25 years**
*US Department of Energy **Visiongain Research, October 2014
2630 2425
542 431
191 46 29
Cumulative Oil Production (MMBO)
Basin Name Total CO2 EOR Candidate ReservoirsPowder River 289Bighorn 105Wind River 45Greater Green River 49Overthrust Belt 12Laramie 11Denver-‐Cheyene 6
Source: SPE-122921-MS-Estimates of Potential CO2 Demand for CO2 EOR in Wyoming Basins
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658
64
297 513
408
75 858
Market Opportunity – Australasia
“To date the recovery has been only 3-4% of the original-oil-in-place, and simulation studies indicate a recovery at abandonment of some 5-10%. Hence, it is envisaged that a suitable EOR scheme may help improve recovery. With a suitable gas injection process, it is estimated that the ultimate recovery would increase to 20-30% implying that some 2.5 MMstb of oil could be recovered”
Area of interest
0 8km NNorthern Cooper
Basin
Field B
Field A
QLD
VIC
SA NSW
WA
NT
Company Fields Reservoirs Miscible Immiscible
Medco 14 76 18 25 Conoco Philips 8 27 18 5 EP Prabumulih 3 59 55 0 Ubep Adera 3 181 181 0 Ubep Ramba 12 8 6 2 Ubep Limau 3 10 10 0 Prabumulih & Pendopo 10 154 92 62 TAC/KSO 5 20 2 2 Pertamina 5 36 1 16
Total 63 571 383 112 Source: SPE-165487-Opportunities and Challenges of CO2 Flooding in Indonesia
NAD
Gas Processing facilitates
North Sumatra
Central Sumatra
South Sumatra
West Java East
Java
East Kalimantan
Sulawesi
Maluku
Papua
Natuna 99
59 427
519
309
168
29 10
111
457
59 898
1,256
17,438 12,293
1,830
7,327
1,212
5,707
1,757
2,136
EOR target in Indonesia (status January 2010)
Indonesia (in MMSTB)
Cumulative production Discovered, unrecoverable by current development (potential for EOR) Proved reserves
42,793 22,336
3,609
4 2
35
3,183 6,598
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Summary
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Near-term Activity Pipeline
CY2015 CY2016 CY2017
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Commence construction of Grieve Facility
Potential acquisition of additional Grieve interest
Complete Singleton bio-CO2 EOR prefeasibility study
Secure support from CSM for final pre-FID Singleton pilot
Grieve Field re-pressurisation complete
Commence commissioning of Grieve Facility
First oil production - Grieve CO2 EOR Project
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§ Only ASX-listed EOR company with 10-years focused EOR experience
§ Strong leadership team with proven track record of value creation
§ Focused on oil field redevelopment in North American proven EOR production fairways
§ Oil price pressures presents a unique opportunity for low cost project asset accumulation
§ Miro Advisors appointed to assess acquisition opportunities
§ Substantial growth potential within core EOR production fairways
§ Potential for Elk to acquire up to 100% ownership and operatorship of Grieve Project
§ Longer-term growth strategy of applying EOR in largely untapped areas of Australia, Indonesia and Malaysia
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Summary
First oil from Grieve CO2 EOR Project targeted within next 12-18 months
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Contact: Level 9, 341 George St, Sydney, 2000
02 9299 9690
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